An Embarrassment of Riches

The Federal Government, which rarely enough finds itself at a loss to devise ways of spending money, has $2.8 billion cluttering its coffers and scant notion of how to get rid of it. The funds are piled up in nonconvertible foreign currencies from Conakry to Colombo. "We have used all the money we can in every way we can," confessed a State Department official last week. "We are no longer making even a dent in the accumulation. We've got to do more."

Most of this odd burden accrues from a key provision of the twelve-year-old Food for Peace program, allowing the U.S. to sell surplus farm commodities to dollar-poor countries for the recipients' own currency, which remains in the nations of origin. About 20% of the cash is earmarked for U.S. use, and part of this is absorbed by routine operations such as maintaining embassies and aid missions. The other 80%, though U.S.-owned, is reserved for the recipient nation's benefit.

In practice, much of this money is more likely to wind up in the bank. One reason is that heavy government spending in most underdeveloped nations could cause inflation. For another, it is seldom used for large-scale development projects, since these would demand additional investment and operating expenses that few poor countries can afford. Frequently the U.S. lends the nation some of its blocked currency, but the interest payments only add to the hoard. One of the most serious problems is governmental limitations on spending written into U.S. legislation.

U.S. custodians of the wealth are not completely without imagination. Loans are frequently given to American businesses operating in foreign countries. Many constructive, noninflationary uses have been found for the funds assigned to a foreign country. In Israel, Egypt and India, U.S. embassies and consulates are allowed to trade local currency to American tourists for dollars.

Nonetheless, U.S. holdings in foreign currency have grown by $382 million in the past five years. In ten countries, the bankroll exceeds U.S. needs for the next two years, and the excess is nearly as large in nine others. India, Pakistan and Egypt pose the biggest problem. In India alone, the U.S. holds $1 billion in rupees.

The pile need not grow forever. Under President Johnson's proposed Food for Freedom program (TIME, Feb. 18), recipient nations would pay for U.S. food in dollars under a long-term credit arrangement starting in 1971. Meanwhile, the U.S. is considering establishing binational philanthropic foundations to soak up much of the cash and use it primarily for education. A bill to start such a program languished in committee last year. Congress apparently could not believe that the Administration really needed help to spend money.

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